No, the only issue would be if the taxpayer deducted more taxes than they actually paid to the state (after considering refunds).
To look at it slightly differently. Suppose you deducted $3000 and got a $200 refund. That means you paid more than you owed; you deducted too much state tax, and normally you would have to amend the previous return to change the deduction to $2800. That's a lot of mess to go through, so the alternative procedure is to report the refund as taxable income the next year, using the "tax benefit" rule. If you get a tax benefit from a deduction, and something changes that would have changed the tax benefit, then you report the income.
In this case, the actual taxes were more than claimed as a deduction, so the refund does not create an overage. There would be no need to amend the return (if that was the correct procedure) because the actual taxes paid in 2017 are still correct (it doesn't matter that some were for 2017 and some were for 2016, the taxes paid in 2017 were all monies that were actually owed in 2017.) The refund in 2018 doesn't change the tax benefit of the amount taken as a deduction in 2017, so it's not taxable now. It does reduce the amount you can claim as 2017 taxes paid in 2018, of course.
